Canadian housing prices over-valued by 30 percent: Survey

Toronto, Nov 20 (IANS) Canada has the highest housing prices in relation to its residential rental rates in 26 housing markets around the world, according to a survey.

Canada, together with Britain and Australia, has “notably over-valued real estate markets,” which are more than 30 percent overpriced, Xinhua on Friday quoted a survey by the Economist magazine as saying.

The survey suggests that “renting may provide more short-term value in the Canadian market.”

In comparing house prices to the countries’ respective rental rates, the magazine found Canada at the top of its charts, along with countries like Australia, Sweden and Britain.

Vancouver, Canada’s western coastal city, has sky-high prices in relation to national real estate values.

According to the Real Estate Board of Greater Vancouver, prices for all types of residential housing jumped 99 percent in east Vancouver, and 82 percent on the west Side.

Warnings about over-valuation of Canada’s housing market have largely been ignored, with Canadians showing no hesitation in continuing to buy, especially in Toronto and Vancouver, the largest and third largest city in the country.

Property prices around the world are on the rise as a whole, at a median pace of 4.7 percent annually, according to the survey.

Only China, Singapore, France, Greece and Italy are witnessing a falling housing prices.

2 Comments

Only 30%? Still in denial, aren’t we? Try 50-60%. All the funny money created by the central bankers in the last 15 years resulted in these unsustainable house price rises. Now it’s the reversing trend. Try to have a rational mind and understand that if things are too good to be true then perhaps they very well likely to be are. Where did this wealth come from out of the blue? Why didn’t people’s houses increase in price so drastically before that in the past century? The builders, bankers, real estate agents, media, neighbours, the governments are there only for their own benefit, not yours. So you should not fall prey to their promises or assurances. Trees do not grow all the way to the moon. At some point they stop. Gravity pulls them back.

Talking from the Middle Eastern expatriates’ perspective, as much as I would hate to say it, things aren’t looking too good at present. With Iran, Iraq, and Libya being allowed to sell their abundant oil in the world markets, the oil prices are likely to stay too low for the next 5 years at least (in fact the world is running out of storage facilities). As per one estimate the prices could fall to $20/barrel whereas most of the GCC have built their national annual budgets on the assumption that the oil prices are going to stay at around $100. So this will cause massive disruption in those countries and there will be plenty of job losses. Many expatriates are likely to return to India in that case. Many gulf countries have already started tapping into their sovereign wealth funds to balance the budgets (selling the family Silver if you like, which is clearly not a good sign). Some Middle Eastern countries are seriously contemplating introducing expatriate remittance tax. There are talks about introducing income tax too. This clearly does not bode well for the Indians working there. The first casualty is going to be Saudi Arabia. That country has extremely under-educated workforce, over-reliance on oil revenues, and a massive welfare state for the locals while the state finances are in a terrible shape. They have even started borrowing from the bond markets (as pumping more petrol further causes prices to fall). At the current rate the country could go bankrupt by 2020. The ruling Saud family is on the verge of losing its grip on the country. Civil war is likely as they do not have good relationship with their neighbours. So, the Indian expatriates are likely going to suffer big time. If these expatriates had invested their money back-home wisely when the Sun was shining then perhaps they will be safe. The coastal real estate has been held up thus far because of the Gulf money and the Gulf money is not going to last very long.

That said, if you have bought a house as a home and you don’t treat it as a cash cow you do not have to worry too much. Enjoy your life. Watch your children grow. Invest in their career. If you don’t have a mortgage then it does not really matter how far the prices fall. But if you have less than 30% equity then you are in big trouble in the years ahead. If you are working in the Middle East and have massive debt, and you lose your job or regional trouble breaks out you won’t be allowed to return to India without clearing the debt first. Think twice before borrowing in that land. It’s Sharia, so not paying back loan comes under criminal law.

It is a sensible and interesting write up from you, that can be written by a person with a thorough knowledge of economics and fiscal matters.

I do no know if all the Canadians (of Indian origin) are happy in that land of boundless distances. though most of it must be under permafrost at any given point in time. Many of them who have settled there do not communicate with their motherland, so we do not know how they are and how are they faring.

Again coming to Gulf, the picture appears to be grim. I know things are very bad and gloomy in Bahrain. As you rightly said, most Saudis are uneducated, but used to being paid fat salaries. As regards the ruling family, they skim lot of monies and must be billionaires and when the going gets tough, they will all vanish away to the western world and invest and live with the money they have stashed in investment havens.

Amongst the expatriates, the largest component are Indians, though even amongst Indians the Keralites are in a majority, simply because these places are El Dorado for them. In fact, the maximum Keralites out of their State and the Indian Union are in Saudi Arabia. In U.S.A. and the western world, they are not many percentagewise.